Longer sentences for benefit fraud: will it work?

The latest effort to 'get tough' on benefit fraud will see maximum sentences increased to ten years. We look at current conviction rates to see whether
the new measures will have any effect

Benefits fraud investigations can be prompted by tip-offs from police, Jobcentre staff or anonymous members of the public. But are they resulting in prosecutions? Photograph: Martin Argles for the Guardian

New guidelines that have been issued to the Crown Prosecution Service will get rid of a £20,000 threshold for benefit fraud. Now, all cases, regardless of the amount concerned, will be dealt with under the Fraud Act, which carries a maximum sentence of 10 years in prison.

Previously, those suspected of low-value benefit fraud were dealt with by magistrates courts who couldn't hand out sentences longer than 12 months. But how many individuals received those sentences and will the new rules have any effect?

£1.3bn benefit fraud in 2012/13

From income support to housing benefit, the latest statistics from the Department for Work and Pensions (DWP) show that £1.3bn was fraudulently claimed in 2012/13. That figure represents 0.8% of the total £166.1bn benefit expenditure for the same period.

But when it comes to overpayment, there's more to it than fraud. Rarely mentioned are two other categories: 'claimant error' and 'official error'. The fact that they're overlooked isn't because they're negligible in size as the chart below demonstrates.

Those other reasons are particularly important given that money overpaid due to 'official errors' has to be written off (£360m last year) and 'claimant errors' are now liable to a new penalty - of £50.

Although that is offset slightly but another neglected set of statistics - underpayment. Unsurprisingly, the amount underpaid fraudulently was £0m in 2012/12 - but £400m was underpaid because of claimant error and a further £190m due to official error.

What about prosecutions?

The DWP has detailed numbers on fraud and error (for every year since 2005, for every category of benefits - and even has a breakdown of claimants' age and gender) but what about data on prosecutions for over-claiming?

Well, there it seems that the numbers are a bit harder to find. A parliamentary question by David Blunkett MP in March 2011 to Employment Minister Chris Grayling showed just how small a fraction of convictions result in custodial sentences.

In 2009-10, 253,708 cases of suspected benefit fraud were reported to the National Benefit Fraud Hotline of which 46,258 were referred to the Fraud Investigation Service for further action...

In 2009-10 8,198 cases were prosecuted for fraud against DWP benefits of which 7,040 received a criminal conviction. A total of 1,340 of these convictions resulted in a custodial sentence of which 929 were suspended.

But perhaps all of this is misleading. Because really, to understand the impact of the new measure, we need far more detailed data - we need to know the average custodial sentence of those that have been convicted of benefit fraud and how much they had fraudulently claimed.

If there are hundreds of 12 month sentences being handed out for low-value benefit fraud then maybe getting rid of the £20,000 threshold and increasing the maximum sentence to ten years will have an enormous impact. On the other hand, if most prosecutions are only a couple of months regardless of the value of benefit fraud, then the new measures don't look set to change much.

Without those numbers, we're left wondering whether the new measures are more 'gimmick' than 'get tough'.

2.30pm How has benefit fraud changed over time?

One of our commenters claimed that "fraud is in decline". Seeing as we have data going back to 2005/06 we thought it important to look at @jonoh's theory.

It's true that the latest data does show a decline from the previous year, but looking at the totals for each type of overpayment since 2005/06 shows that fraud has increased by 65%, claimant error has increased by 49% while official error has fallen by 41%.

4.00pm Benefit fraud compared to other types of fraud

Several of our commenters were quick to draw the comparison between benefit fraud and other types of financial misconduct. @Drools asked "what is the maximum sentence for banking fraud?" while @Mrilyas said "What about tax-dodgers?"

We looked at the report published by the National Fraud Authority in June 2013 to see how the amount lost in government revenue compares to other types of fraud. While it's true that benefit fraud is more than half the value of all types of local authority fraud put together, it represents just 8.6% of tax fraud.

Looking outside of the public sector, the £1.2bn lost in benefit fraud also pales in comparison to insurance fraud (£2.1bn) mass marketing fraud (£3.5bn) or fraud committed by large enterprises (£6.7bn). Our readers raise a valuable point. It's a long table but we thought it was worth reproducing it here.

Breakdown of losses due to fraud

Victim

Total estimated fraud loss

Fraud type

Fraud loss

Tax system

£14.0 billion

Tax Fraud

£14.0 billion

Vehicle excise fraud

£40 million

Central government

£2.6 billion

Procurement fraud

£1.4 billion

Grant fraud

£504 million

Television licence fee evasion

£204 million

Payroll fraud

£181 million

NHS patient charges fraud

£156 million

NHS dental charge fraud

£73 million

Student finance fraud

£31 million

Pension fraud

£14 million

National Savings and Investments fraud

£0.40 million

Local government

£2.1 billion

Housing tenancy fraud

£845 million

Procurement fraud

£876 million

Payroll fraud

£154 million

Council tax fraud

£133 million

Blue Badge Scheme misuse

£46 million

Grant fraud

£35 million

Pension fraud

£7.1 million

Benefit and tax credits systems

£1.9 billion

Benefit fraud

£1.2 billion

Tax Credits fraud

£670 million

Small, medium and large enterprises in the UK

£15.9 billion

Small enterprises

£7.7 billion

Medium enterprises

£1.5 billion

Large enterprises

£6.7 billion

Financial and insurance activities

£5.4 billion

Insurance fraud

£2.1 billion

Mortgage fraud

£1 billion

Plastic card fraud

£388 million

Online banking fraud

£40 million

Cheque fraud

£35 million

Telephone banking fraud

£13 million

Estimated other

£1.8 billion

Registered charities in Great Britain

£147 million

Income £0 Ð £100,000

£5.2 million

Income £100,001 Ð £500,000

£16.3 million

Income £500,001 Ð £5 million

£23.0 million

Income over £5 million

£102.8 million

UK adult population

£9.1 billion

Mass marketing fraud

£3.5 billion

Identity fraud

£3.3 billion

Online ticket fraud

£1.5 billion

Private rental Property fraud

£755 million

Pre-payment meter scams

£2.7 million

Other/mixed

£919 million

Housing tenancy fraud (housing associations)

£919 million

5:10pm Detailed benefit charges data

We've just received an email from the Department for Work and Pensions that pointed us in the direction of this Freedom of Information Request made in May 2013. In it, the Crown Prosecution Service provide a detailed breakdown of charges for various types of offences, totalling 15,932.

The totals reflect "offences charged and reaching a first magistrates court hearing". It's helpful, but we're still a long way off knowing what proportion of those result in a prison sentence and would be affected by the new rule change.

Do you think the new measures will result in more prosecutions? Maybe you think that the deterrent effect alone makes this a worthwhile policy? Share your views in the comments below and let us know what other numbers you'd like to see here - we'll update the post in response to your suggestions.